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Loss Aversion in Taste-Based Employee Discrimination: Evidence from a Choice Experiment

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  • Lippens, Louis

    (Ghent University)

  • Baert, Stijn

    (Ghent University)

  • Derous, Eva

    (Ghent University)

Abstract

Using a choice experiment, we test whether taste-based employee discrimination against ethnic minorities is susceptible to loss aversion. In line with empirical evidence from previous research, our results indicate that introducing a hypothetical wage penalty for discriminatory choice behaviour lowers discrimination and that higher penalties have a greater effect. Most notably, we find that the propensity to discriminate is significantly lower when this penalty is loss-framed rather than gain-framed. From a policy perspective, it could therefore be more effective to financially penalise taste-based discriminators than to incentivise them not to discriminate.

Suggested Citation

  • Lippens, Louis & Baert, Stijn & Derous, Eva, 2021. "Loss Aversion in Taste-Based Employee Discrimination: Evidence from a Choice Experiment," IZA Discussion Papers 14438, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp14438
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    References listed on IDEAS

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    1. Morten Størling Hedegaard & Jean-Robert Tyran, 2018. "The Price of Prejudice," American Economic Journal: Applied Economics, American Economic Association, vol. 10(1), pages 40-63, January.
    2. Weichselbaumer Doris, 2017. "Discrimination Against Migrant Job Applicants in Austria: An Experimental Study," German Economic Review, De Gruyter, vol. 18(2), pages 237-265, May.
    3. Baert, Stijn & De Pauw, Ann-Sophie, 2014. "Is ethnic discrimination due to distaste or statistics?," Economics Letters, Elsevier, vol. 125(2), pages 270-273.
    4. Lippens, Louis & Baert, Stijn & Ghekiere, Abel & Verhaeghe, Pieter-Paul & Derous, Eva, 2020. "Is labour market discrimination against ethnic minorities better explained by taste or statistics? A systematic review of the empirical evidence," GLO Discussion Paper Series 615, Global Labor Organization (GLO).
    5. David Neumark, 2012. "Detecting Discrimination in Audit and Correspondence Studies," Journal of Human Resources, University of Wisconsin Press, vol. 47(4), pages 1128-1157.
    6. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    7. Baert, Stijn & Albanese, Andrea & du Gardein, Sofie & Ovaere, Jolien & Stappers, Jarno, 2017. "Does work experience mitigate discrimination?," Economics Letters, Elsevier, vol. 155(C), pages 35-38.
    8. Sebastian Butschek & Thomas Walter, 2014. "What active labour market programmes work for immigrants in Europe? A meta-analysis of the evaluation literature," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-18, December.
    9. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    10. David Neumark & Ian Burn & Patrick Button & Nanneh Chehras, 2019. "Do State Laws Protecting Older Workers from Discrimination Reduce Age Discrimination in Hiring? Evidence from a Field Experiment," Journal of Law and Economics, University of Chicago Press, vol. 62(2), pages 373-402.
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    More about this item

    Keywords

    ethnicity; loss aversion; employee discrimination; taste-based discrimination;
    All these keywords.

    JEL classification:

    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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